Buying Tax Liens on Credit – What Not to Do

Buying Tax Liens on Credit – What Not to Do
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The following post involves an advertiser that I receive commission from, but it’s worth telling a story about why they are on my website: 

So, when I first began buying tax liens a few years back, I was more strapped for cash than I’d like to admit.  The real estate market was booming and I had my money in quite a few deals (luckily, I wasn’t killed too bad in the market fall).

After learning a little bit about buying tax certificates, I wanted to try it out by buying a few tax liens in New Jersey.  I had heard about Lending Club from a personal finance blog that touted the returns you could make from investing with them—basically, they pool together investors to participate in unsecured, personal loans.  The returns are OK—mostly in the low teens or high single digits.  What’s nice about it is that you can pick which loans you want to be in and only need to invest in $25+ increments.

Anyhow, I had the idea to solve my cash shortage plus get some leverage on my investment by actually taking out a loan thru Lending Club.  I put my ‘blurb’ about how I was going to spend the money on tax liens and sat back to see what happened.  The response wasn’t great.  I got a good rate (they do ask for credit information which mine was good) but didn’t get anywhere the amount I wanted.  In fact, I only received about $7000 when I was hoping for twice that.  You see, they give you a set period of time to fill up your request with investors; and, I guess trying to convince investors to fund investors isn’t the story.

It was a three-year loan and luckily my liens paid off very quickly and I was able to pay it off and keep the spread (what little it was).  Lesson learned—it’s not the best way to buy liens. But a year later, I did start putting money in as an investor.  The returns aren’t too bad and the cash flow is steady.  I’ve found it to be a nice place to park a little cash rather than stuffing it into a bank account earning no interest. 

If you’re interested, you can use my affiliate link and check it out yourself: Lending Club Discount Link (if you sign up, I get a small commission that I’ll put back into this resource).

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